fecc bioenergy market study_general presentation_30 6 2010_euro

7/30/2019 FECC Bioenergy Market Study_General Presentation_30 6 2010_euro

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Market Study on the BioenergySector in China

General Presentation

30.6.2010


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Contents

2

Introduction

Market and policy summary

Overview of selected technologies

Gasification

Distributed energy and on-site power

Re-cycled fuels

Biocarbon

Biogas

Biomass power generation

Liquid bio-fuels: bio-diesel and bio-ethanol


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Introduction

3

The main objective of the study is to identify the actual andconcrete business opportunities for Finnish companies in thebioenergy sector in China.

Special focus is on the technologies and expertise available inFinland. Focus areas selected together with Finnishcompanies

The study has been ordered by Finnish Environmental Clusterfor China (FECC), and carried out by Gaia Network Oy


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Market and policy summary


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Biomass resources in China

Experts estimate that there are 460 million tons of agricultural and forest residue thatcan be used as energy in China. It equals to 242 million tons of standard coal. Strawsaccount for 240 million tons, agricultural processing residue 60 million tons and forestresources 160 million tons.

Straw from agricultural production is mainly from Hebei, Inner Mongolia, Liaoning, Jilin,

Heilongjiang, Jiangsu, Henan, Shandong, Hubei, Hunan, Jiangxi, Anhui, Sichuan, Yunnanand etc.

Forest resources are mainly from Heilongjiang, Inner Mongolia, Jilin, Yunnan, Sichuan,Tibet and etc.

Illustration of geographical distribution with a map. See next slide

5


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Geographical distribution of resources

6

Agricultural

residue

Forest

residue


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Goals for biomass energy developmentEleventh Five Years Plan (2005-2010)

During the Eleventh Five Years Plan (2005-2010), we accelerate thedevelopment of biomass energy, increase the development and use ofrenewable energy in rural areas and gradually expand the share of renewableenergy in energy supply. In this way, we can pave the way for larger use anddevelopment of renewable energy.

Developing technologies and launching pilots are the first stage and we willactively promote biomass power generation.

In 2010, renewable energy accounts for 10% of energy consumption. Annualconsumption of renewable energy in this country will be equivalent to 300million tons of standard coal.


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National policyFeed-in tariff (1/2)

Trial Measures for Administrating Feed-in Tariff and Other Charges ofPower Generated from Renewable Energy (NDRC, 4.1.2006)

Feed-in tariff approximately 30 /MWh (0.25 Yuan /kWh)

Power generation program will enjoy the tariff for 15 years since itstarts production

Starting from 2010, the newly approved programs will have an annual2% reduction in subsidy compared with that of the previous year

In a power generation program using mixed sources of energy, morethan 80% has to be from renewable sources to qualify

81 Yuan = 0,1206 (30.6.2010)


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National policyFeed-in tariff (2/2)

0.25 Yuan/kWh is the subsidy to biomass power generation projects on top of the basicprice. The basic price is the on-grid price of the local desulfurization coal-fired unit.Different places, different power plants, the on-grid prices are different.

Generally, on-grid prices of coal-fired units in different regions are:

North China: 40-48 /MWhNortheast China: 36-45/MWh

East China: 49-58 /MWh

Guangdong province: 57-52 /MWh

Central China: 47-48 /MWh

Northwest China: 34-43 /MWhSouthwest China: 35-53 /MWh

Measures for Administrating Feed-in Tariff and Other Charges of Power Generatedfrom Renewable Energy (NDRC, 4.1.2006)

9


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National policyGuarantee for grid connection

National energy company should purchase all the power generated fromrenewable energy programs that have been approved by the state.

If the gas and heat generated from renewable energy programs can meet thestandards of gas and heating companies, they should be connected to the grid.

If denied, any financial loss shall be compensated by the energy company, orthe fine will be doubled.

Programs that have been approved before Dec. 31st, 2005 will follow old rules.


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Bioenergy policies (I)

11

Policy Date Issued Details

Amendments to Renewable

Energy Law2010.4.1

Establish standalone systems in the network uncovered area

Take advantage of clean and efficient bioenergy fuel

Subsidize the additional cost of electricity from renewable

energy nation-wide

Tax incentives and funding support with discounted loans

through financial organizations for listed renewable items

Notice on Renewable Energy

Price Subsidies and Quota

Trading Notification Program

(by National Development

and Reform Commission,

State Electricity Regulatory

Commission)

2009.12.27

Additional subsidies for public renewable standalone power

systems; subsidies formulated by provincial price authorities

The additional subsidies cover operating and maintenance

costs of standalone power systems, renewable energy-based

electricity generation projects, etc.


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Bioenergy policies (II)

12


Promoting policy to speed up

the development of bio-

industry

(by State Council)

2009

Target of the policy is to guide technology, human resources,

capital and other resources to the biotechnology industry

cluster. It promotes biotechnology innovation and

industrialization, and helps to establish the comprehensive

system for market-oriented, and combination of research in

industrial technology.

The policy promotes the cooperation of multinationalcompanies large-scale biological projects but also

encourages small and medium size biotechnology companies

with independent intellectual property rights.

Circular Economy Promotion

Law

2009.1.1

Encourage international cooperation in circular economy

Full purchasing of grid electricity generated by overall

utilization enterprises

Improve the comprehensive utilization rate of wood forforestry companies and sludge for related enterprises

Energy-saving projects given priority in financial support


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Bioenergy policies (III)

13


Notice on Comprehensive

Utilization of Resource and

Other Product VAT Policy

2008.7.1

Power generation enterprises (especially large ones) shall

invest in renewable energy-based electricity generation

projects

Renewable Energy

International Cooperation

Plan (Ministry of Technology

and NDRC, 2007)

2007

Target of the plan is to strengthen the cooperation betweenChina and other countries in the field of science and applied

technology of renewable energy technologies

Focus areas include biomass fuels and biomass power

generation (non-food energy crops, ethanol from cellulose

materials, energy, forestry, bio-diesel, biomass briquette and

biomass gasification, power generation, etc.

Chinas Energy Condition andPolicy

2007.12 Encourages foreign investment in renewable energy powergeneration projects with unit capacity over 600,000 kW


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Bioenergy policies (IV)

14


The Middle and Long Term

Renewable Energy

Development Plan

2007.8

Focus on bio-ethanol and biodiesel development

Establish biomass power plant in area s with forests

Financial funding for the implementation of the Renewable

Energy Law

Renewable Energy Law 2006.1.1 Encourage multiple parties to participate in developing and

using renewable energy

Pilot Scheme for Sharing

Renewable Energy Prices

and Costs

2006.1.1

Subsidies for on-grid electricity prices of 30 /MWh

Subsidized for 15 years

Starting 2010, subsidies to newly established power projects

will decrease by 2% per year


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Bioenergy market overview (1/2)

15

Customers include governments, private companies and state-owned enterprisescompetitors can also often be customers

Private companies often engage in bioenergy projects using own technology, yet theyare sometimes willing to purchase more advanced technology from competitors

Large utilities (e.g. big 5 electricity companies) normally purchase technology andequipment from other providers, rather than develop themselves

Most bioenergy sectors studied are still in initial stages of development in China;gasification & standalone power projects and biogas are among more prevalent

Few concrete projects (excluding biogas) announced or planned, but substantial interest inpotential projects

Most projects currently still not profitable due to high production costs (e.g. raw materialpelletizing & transport), immature supporting technologies, and lack of carbon tax

Customer &Competitor

Analysis

Feed-in tariff for on-Grid Electricity; guaranteed purchase of all electricity generated

Tax Breaks VAT rebate and income tax exemption to project owners; tariff and VATexemption for imported equipment used for domestic renewable energy

Discounted Loans < 3% interest for 1-3 years; provided by central government throughChina Development Bankand other commercial banks

Government

Policy Support

BioenergyProjects

1) RE = Renewable Energy


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Bioenergy market overview (2/2)

16

Central and local governments generally encourage bioenergy development

Several national regulations affect bioenergy, such as The Amendment of Renewable EnergyLaw(2010) and The Middle and Long Term Renewable Energy Development Plan (2007)

Local governments generally follow the central governments lead in adapting the samepolicies & regulations, Shanghai has clearest and most specific policies compared withother areas, e.g. 120 /kW subsidy to Distributed Energy (DE) projects

To prevent competition for resources, each urban district / rural county can generally only

have one bioenergy project / programme invested

Regulations

Opportunities for Finnish players differ by sector

Some Finnish technologies are perceived as too advanced for China market

Need for educating potential customers

Project owners generally open to discussing cooperation, even if they already employ

proprietary technology

Opportunities &

Challenges


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Indicative electricity prices in regions

17

Appendix

Region Residents Common

industrial and

commercial

Large industries Small and

medium

fertilizer

production

Agricultural

use

North China 50.8-66.2 65.1-101.9 52.3-84.9 32.3-45.8 45.4-75.9

Northeast

China

54.2-63.5 87.6-109.3 56.0-68.7 40.4-50.8 48.3-56.0

East China 54.0-68.1 98.5-110.1 67.0-80.2 26.9-33.2 54.0-83.0

Central

China

67.8-72.6 97.4-120.4 59.3-74.0 32.7-48.3 44.2-84.7

Guangdong

province

73.4 110.7 80.2 73.7

Northwest

China

53.4-61.7 74.6-97.3 40.3-62.6 22.6-36.1 37.2-55.5

Southwest

China

61.7-63.2 96.6-102.0 63.7-72.7 30.4-43.1 56.5-64.2

/MWh


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Natural gas priceBeijing

18

/m3

Appendix

Usage Price

Industry 0.284

Residential use 0.248

Public service 0.309

Heating 0.236

Cooling 0.224

CHP 0.188

Compressed natural gas(CNG)

Mother-staion 0.230

Son-station 0.309


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Natural gas priceShanghai

19

/m3

Appendix

Category of users Price

Grid company directly

supply to industrial users

CHP 0.221

Natural gas power

generation

0.234

Chemistry industry zone 0.264

City gas company supply to

industrial users

> 5 million m3 0.363

1,2 million m3 - 5 million m3 0.424

< 1,2 million m3 0.460

Natural gas as vehicle fuelCNG 0.433

Residential users 0.303


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Example of non-governmental power producer (1/2)

Dairy demo farm

Mengniu Australia International Dairy Demo Farm, biogas power

generation and comprehensive utilization project

Cow manure resource: manure from 10 000 cows 280t/d, urine

and flushing water 360 t/d

Project scale: 4 biogas digesters with volume 2500m3, installed

power generation capacity 1.25MW

Designed biogas production: 4 million m3/year

Designed power generation: 8 GWh/year

Ownership: Mengniu Biomass Co., Ltd.

Technology: CHP. Biogas fermentation technology: CSTR. Mixer(stirring machine), biogas composition analyzer, tank material of

the biogas digester, tank-body construction of the biogas digester,

are all German products and technologies.

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Appendix


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Example of non-governmental power producer (2/2)

Chicken manure biogas

Chicken manure biogas power generation project, Beijing DQY

Agriculture Technology CO. Ltd.

Chicken manure resource: 212t/d, TS 30%

Project scale: 4 biogas digesters with 3000m3, installed power

generation capacity 2MW

Designed biogas production: 7 million m3/year

Designed power generation: 14 GWh/year

Ownership: Beijing DQY Agriculture Technology Co. Ltd;

Technology: CHP. Biogas fermentation technology: CSTR. Mixer

(stirring machine), biogas composition analyzer, tank of the biogasdigester are German technology and products; biogas power

generator is Austrian product.

21

Appendix


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Overview of Selected Technologies

Gasification

Distributed Energy and On-site Power

Re-cycled FuelsBiocarbon


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23

Mainly use downdraft furnace; key raw materials straw, corn cob, and wood residues toeither generate power or gas

Typically small ,with


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If Finnish technologies are more advanced, we will of course welcome their

technologies Project owner of gasification project

We are very eager to cooperate with Finnish technology companies and are

especially interested in gasification technology (but not pelletizing equipment)

China already has some good equipment companies. I can suggest two ways for

Finnish companies to enter China: Cooperate with local technology players and outsource equipment production to them, or

set up a JV to output technology together and sell it using the domestic partners network

Invest in gas management & distribution, which will be an emerging trend

Project owner of municipal gasification project

Bioenergy is a very new industry in China and few companies can afford the costIknow little about Finnish companies, but they should have more advanced

technologies and should have opportunities in China

Project owner of a gasification project

Selected Quotes from Industry Players

24

O i f Di ib d E P j


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Standalone power technologies are widely used in Chinese Distributed Energy (DE)Projects, which are concentrated in urban areas (located near the main national naturalgas pipeline) such as Beijing &Shanghai

The main fuel source for these projects is natural gas, and the main technologiesapplied are natural gas engines and/or micro turbines

Potential

Partners

Competitors

Existing DE

Projects

Most funding support is in the form of municipal subsidies providing favorablenatural gas prices

Finnish technologies are generally welcome

Framework &

Energy Policies

Overview of Distributed Energy Projects

in China

Few local technology competitors; however local equipment suppliers enjoy priceadvantages (~1/3 price of imported equipment)

Foreign competitors including Capstone, GE, Cummins, Caterpillar, Ingersoll Rand,Siemens, Mitsubishi, and Yanmar

Chinese DE companies are possible local partners, as they participate in theinstallation of pilot projects, project bidding, and importing equipment

Fuel cell technology is still relatively new in China, the most likely initial partners areresearch centers or institutes

Shanghai municipality is the most active area for DE projects


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The market potential for DE systems is large; however, the market is not wellestablished. Thats why we are planning to launch a promotion programme in the

second half of 2010.

Secretary General at an Energy Conservation Organization

I suggest foreign companies build a pilot project to show us the efficiency and

effectiveness of their technology. This is the best type of advertisement.DE Specialist at a Shanghai Government Commission

Now is the best time for Finnish SOFC to enter China, as the Chinese technology is

under developed and other foreign SOFC technologies have not really entered the

Chinese market.

SOFC Project Leader at a Leading Chinese Research Institute


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O i f R l d F l P j i


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Customers &

Competitors

Framework &

Energy Policies

Existing REF

Projects

Little interest for incinerating / boiling sludge or industrial waste; most recycled fuelprojects use direct combustion of household garbage, straws and forest residues

After sorting, only leftover garbage/waste with low fuel value arrives at incinerationplants for treatment & power generation; imported equipment is often not suitable

Geography: incineration projects concentrated in developed eastern coastal areas,including Jiangsu, Zhejiang and Guangdong provinces

Possible local partners : DYNA Green , Wuhan Kaidi, and large state electricitycompanies, who normally buy technology from other companies

Key competitors : both domestic ones such as DYNA Green and Wuhan Kaidiandforeign ones such asAlstom and BWE

Similar to other bioenergy projects, incineration projects can receive on-grid electricitysubsidies and garbage incineration subsidies, which vary according to specific area

Local governments still encourage imported technologies (although domesticincineration & boiling technology are already seen as competitive)

Foreign RDF technology & equipments may need to be adjusted to

adopt Chinas raw materials

Overview of Recycled Fuel Projects in

China


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Chinas bioenergy market is still developing, and all the projects are still losing money . In the same

county, only one bioenergy project/programme is permitted to prevent competition for resources

a project owner of incineration project

Denmark has the best biomass power generation technology; Finnish technologies are second or

third level in the worldMy suggestions to Finnish companies:

Location: as Finnish technologies are strong in wood /forest residues, they can be introduced

to the areas of China with rich wood/forest resources

Adjust strategy: As Finnish technology is not the best, Finnish companies need to be clearabout their own ability and adjust entry strategy if necessary

Investment: Finnish companies can also enter into China through project investments


Our tech expert thinks RDF has few opportunities in China as Chinese garbage is quite different

from foreign countrieshigh fuel value garbage (e.g. board & paper) used to make transportable

RDF has already been selected out by cleaners for other purposes before it is sent to us




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BBQ / Fuel

Chemicals & mining

Medical

Water & food treatment

Biocarbon fuel (uncommon)

Charcoal

Fertilizer (soil conditioner)

Activated carbon

Wood remainders

Fresh bamboo /

bamboo remainders

Fruit shell (mainly coconut)

Overview of Biocarbon Market in China

Wood remainders & coconut shells are most commonly used raw material

Charcoal & activated carbon (for water purification) are most used biocarbon products

Biocarbon fuel is still new product to the China market and is not frequently used

Few pure tech providers most also produce biocarbon products; mainly specialize in 1 type

Thousands of decentralized small players; some concentrations of active carbon producers in

Henan province and charcoal producers in Henan, Shandong, and Hebei provinces Specific standards exist for almost all aspects of active carbon commercialization

29

China Biocarbon industry still focused on lower-quality products

(e.g. charcoal); advanced higher-quality products are imported

Common Raw

Materials

Biocarbon

Products

Common

Applications


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Biocarbon Market Potential Estimate

30

While largest potential markets are for biocarbon fuel and charcoal,

this depends on Finnish firms ability to capture market share

Biocarbon Product Potential MarketEst. Market Value

(2009)

Biocarbon Fuel Thermal Coal (for fuel) USD 168-172billion

Charcoal Charcoal (for BBQ)USD 26-31

billion

Soil Amendment Nitrogen FertilizerUSD 4-6

billion

Active Carbon

Mainly higher-end active

carbon imports used in:

Chemicals & mining

Medical

Water Treatment

USD 51-60

million

Note: While China has nearly 1500 active carbon producers, most produce low quality/price

active carbon; higher-quality/priced active carbon is commonly imported


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Notes on Biocarbon Market Potential

Estimate

31

Estimated market potential for biocarbon fuel, charcoal, and soil amendment

determined through known demand for their main potential / substitute products

For active carbon, assumed Finnish players focus on types of active carbon that yield

highest price per ton, which in China are higher-quality active carbon used mainly in:

Chemicals & mining Medical

Waste Treatment

As this higher-quality active carbon is commonly imported, active carbon imports in

2009 are used as the potential market in this estimation

All data is estimated from analysis of multiple sources, including secondary research

and primary interviews with industry players, research centers, etc.


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Common Assertion: Our core tech in manufacturing *fertilizer+ is the top in this field

in China!- Senior tech engineer at Fertilizer Producer

Most Chinese companies exporting active carbon products are exporting low-level

products and importing more advanced products, like active carbon used for gold

extraction or medicine

-Researcher at Active Carbon association

Biocarbon fuel is not common in China, since production costs are much higher

than for traditional fuel, and producers would not sell at a loss. While charcoal can

also be used as an industrial fuel, in reality it is almost never used. It is mainly used

for BBQ.

- Industry expert at Charcoal manufacturer



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Biogas


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Biogas objectives in Chinese energy policy

Agro biogas project are an important part of the Government NewCountryside policy

Multi-benefit projects creating economic, social and biological benefits

Farms and neighboring households are provided with clean energy

Slurry and residues are utilized to develop eco-agriculture andpollution-free farm products

Animal wastes discharge according to laws and regulations

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Investment subsidies

Central government subsidies

Western region: 45% of total investment, total subsidy


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Provincial goals of biogas production

Southern part of coastalareas (Guangdong, Zhejiang,

Shanghai, Jiangsu etc.)

Reduce the pollution fromanimal farms and recover

energy Biogas is used for power

generation or as fuel gas

Slurry is discharged aftertreatment (having reachedthe discharge standard)

Other southern areas(Sichuan, Hunan, Hubei,

Anhui etc.)


energy Biogas is used as fuel gas

or power generation

The digestate are first usedas fertilizer in agriculturalproduction. Excess isdischarged after treatment

(having reached thedischarge standard)

Northern areas (Shandong,Hebei, Henan, Shaanxi,

Shanxi etc.)


energy Biogas is used as fuel gas

or power generation

The digestate are first usedas fertilizer

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Sizes of biogas plants

New standard Production of biogas per day

Large scale: 400-19903/

Medium scale: 150-4003/

Small scale: < 1503/

Old standard

37

Size Total

Volume (m3)

Volume of single

tank (m3)

Biogas

production

(m3/d)

Large 1000 300 300

Medium 100-1000 50-300 50

Small 50-100 20-50 20


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Animal farm biogas projectsPlan 2006-2010

38

Distribution

By the end of 2005 Newly-built in 2006-2010 By the end of 2010

Large-and-

medium-sized

animal farms

Large-and-

medium-sized

biogas projects

Newly-built

large-and-

medium-sized

biogas projects

Large-and-

medium-sized

biogas projects

Percentage in current

large-and-medium-

sized animal farms (%)

Total 11952 700 4000 4700 39.32

Westernregion

Total 1541 65 390 455 29.53

southwest 852 56 180 236 27.70

Northwest 689 9 210 219 31.79

Central

and

northeaste

rn region

Total 5437 292 1560 1852 34.06

Hilly area in

southeast1522 169 320 489 32.13

Plain area near

Yellow Sea and

Huai Sea

2313 93 700 793 34.28

Northeast 1602 30 540 570 35.58

Eastern region 4974 343 2050 2393 48.11


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Realised projects and output 2008 (1/3)

39

Province Large biogas plant Medium biogas plant Small biogas plant

Num

ber

Total

volume

of

digester

(104m3)

Annually

biogas

production

(104m3/a)

Number Total

volume of

digester

(104m3)

Annually

biogas

production

(104m3/a)

Number Total volume

of digester

(104m3)

Annually

biogas

production

(104m3/a)

Beijiang 70 4.4144 1267.848 41 0.820 585.1 17 0.098 5.230

Tianjin 5 0.220 45.500 71 0.400 19.300 40 0.145 5.620

Hebei 38 2.451 425.665 742 9.875 788.506 532 1.662 208.233

Shanxi 88 4.034 1543.390 11 0.058 2.032 185 117.0 0.654

Neimeng 9 2.035 636.600 10 0.140 27.711 7 0.073 2.220

Liaoning 253 9.521 451.186 33 0.782 39.983 14 0.044 5.433

Jilin 0 0 0 0 0 0 13 0.052 20.000

Heilongjiang 22 1.070 390.55 5 0.120 43.800 152 0.760 91.200

Shanghai 0 0 0 0 0 0 0 0 0

Jiangshu 88 6.120 1087.983 529 10.888 992.119 421 1.909 139.321


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40


Num

ber

Total

volume

of digester

(104m3)

Annually

biogas

production

(104m3/a)

Number Total

volume

of digester

(104m3)

Annually

biogas

production

(104m3/a)

Number Total volume

of digester

(104m3)

Annually

biogas

production

(104m3/a)

Zhejiang 292 15.116 1360.230 4146 53.371 4894.360 3508 12.142 1103.932

Anhui 17 1.792 209.609 171 1.750 119.802 324 2.186 101.728

Fujian 405 25.303 3217.887 651 9.415 988.887 4037 23.810 1017.417

Jiangxi 53 9.95 1016.38 440 9.68 989.30 1374 5.32 543.70

Sandong 105 12.512 4336.870 406 4.137 396.738 966 5.266 341.600

Henan 286 17.824 2239.800 1500 17.137 1347.209 1677 5.287 308.486

Hubei 22 1.150 209.875 135 2.395 307.658 315 1.385 159.483

Hulan 45 2.771 373.854 1072 8.987 929.266 6930 18.564 1632.371

Guangdong 225 20.005 1986.815 248 9.56 2174.84 459 1.920 174.270

Guangxi 27 0.554 48.435 421 4.822 493.080 907 3.250 336.673


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41


Num

ber

Total

volume

of digester

(104m3)

Annually

biogas

production

(104m3/a)

Number Total

volume

of digester

(104m3)

Annually

biogas

production

(104m3/a)

Number Total volume

of digester

(104m3)

Annually

biogas

production

(104m3/a)

Hailan 187 10.285 3003.200 124 0.954 81.230 160 0.812 115.621

Chongqing 53 3.688 114.569 507 6.504 355.876 624 2.397 99.570

sichuan 326 25.852 2901.920 1375 24.511 2229.328 789 3.497 338.189

Guizhou 4 0.180 19.440 82 0.912 54.720 132 0.679 40.764

Yunlan 2 0.300 16.875 14 0.335 37.600 36 0.157 37.365

Xizang 0 0.000 0.000 0 0.000 0.000 0 0.000 0.000

Shanxi 3 0.180 27.000 72 1.440 180.000 71 0.355 42.600

Ganshu 5 0.485 24.500 27 0.270 76.650 58 0.175 53.126

Qinghai 0 000.0 0.000 0 0.000 0.000 0 0.000 0.000

Ningxia 29 0.870 317.550 29 0.435 78.300 125 0.570 51.300

Xinjiang 2 0.120 0.720 2 0.040 0.120 12 0.060 3.600


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Current activity and plans for animal farm

biogas plants

2008

Total39.510operational

plants Large 2.761

Medium12.864

Small

23.885

2009

1600 newplants

2010

Estimation:1.000 newplants

2011-2015

Rural

BiogasPlan

Masterplan

Beingprepared

Target to

build 7.500new plants

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Case Sichuan

Biogas policy in Sichuan

Sichuan provincial policy aligns with national policies

In 2006, Sichuan Peoples Provincial government launched Decisions

of Sichuan Peoples Provincial Government on Accelerating RuralBiogas Construction (Chuan Gov. *2006+ No. 7)

In 2007, Sichuan Government issued Management Measures of Rural

Energy Construction (Order of Sichuan Gov. No. 163)

In 2009, Sichuan Development and Reform Committee and AgricultureAdministration published Management Measures of Large and

Medium-Sized Biogas Projects on Animal Farms

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Case Sichuan

Biogas activity

Status June 20094.545 million household biogas digesters

1 701 large and medium-sized biogas plants

58 725 biogas septic tanks for sewage treatment

2009

60 newly built large and medium-sized biogas plants

2010

Estimated 30 newly built large and medium-sized biogas plants

Plan 2009-2015

8512 new large and medium-sized biogas plants on animal farmsLarge 1692

Medium 6820

Total estimated investment 1,2 billion

Central government applied for investment subsidy equaling 45% of the total investment

Local government ready to invest 5% of the total investment44


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Case Sichuan

Market environment

Customer potential

Sichuan has about 10,000 large and medium-sized animal farms

Size of government funding defines number of the villages building biogas projects utilisingstraw.

In 2009, there were 50 such projects around China with 2 in Sichuan

Raw material availability250 million tons of animal waste and washing water per year

50 million of straws per year

Qualification system on medium and large scale biogas plants

Institution submitting a feasibility study should have at least second grade consulting

qualification on agricultural or environmental projects Institution providing preliminary design and shop drawing should have at least second grade

consulting qualification on agricultural or environmental projects

Institution constructing a plant should have at least third grade construction qualification onenvironmental projects

45


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Case Sichuan

Competition situation

Major consultants and designers of biogas plants

Chengdu Energy and Environment Project Design Institute of Ministry of Agriculture

Hangzhou Energy and Environment Project Co. Ltd.

Qingdao Tianren Environmental Project Co. Ltd.

Beijing Municipal Research Institute of Environmental Protection.

Major construction companies of biogas plants

Qingdao Tianren Environmental Project Co. Ltd.

Sichuan Mengte Project Construction Co. Ltd.

Hangzhou Energy and Environment Project Co. Ltd.

Chengdu Tongde Tianren Environmental Project Co. Ltd.

Additionally there are another 360 companies with annual revenue of over2 million RMB (0,24 M) engaged in environmental protection projects

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Biogas plant types

Rural area plants

Reducing pollution from animal farms

Recovering energy and utilize resources

Agro biomass plants

Recovering energy

Collecting biogas for farmers

Municipal plants

Reducing quantity of sludge

Recovering energy

Industrial plants

Reducing pollutants

Recovering energy

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Biogas related power generation

technologies

Gas engines

Biogas power generation mainly by internal-combustion engine

Manufactures include: Jinan Diseal Engine Co. Ltd., Shengli Power EquipmentGroup of Shengli Oil Field, Nantong Hehai Power Equipment Co. Lte., NantongBaoju Gas Engine Co. Lte., Kangda Mechanical and Electrical Co. Lte.

Microturbines

Currently not used in China

Price is the key issue. If the price can compete with Chinese gas engines andgood after-sales and maintenance service can be provided, the marketopportunity is large

Fuel cells

New technology still in research stage

When the technology is mature and the price is reasonable, there will besizeable business opportunities

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Technology option - upgrade to vehicle use

China is investigating the technologies and equipments for upgrading thebiogas for vehicle use

Southwest Chemical Industry Reasearch Institute and Chengdu YalianScience and Technology Co. Ltd have developed an upgrade technology

Henan Zhenyuan Group plans to build a biogas project for vehicle usewith daily production of 2000m3

Finland has the relatively mature technologies and equipments for

Middle scale biogas project upgrading system

Vehicle gas charging equipments

If these technologies and equipments priced competitively, they can gain market sharein middle and large scale biogas plants

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Biogas plant design and construction

The design and construction of biogas plants is a very tough business for Finnish companies

China has long experience of designing and building biogas plants at a relatively low cost

Finland lacks the image of Germany, Denmark and Sweden as the forerunners of biogas

technology in the mind of Chinese officials, biogas project designers and researchers

Biogas projects are not necessarily profitable in energy terms. The purpose of biogas plantsis to reduce pollutants and fulfill regulatory requirements

The utilization of biogas is the second purpose => owners reluctant to invest more than a minimum

Even though highly developed, project owners will not choose foreign technology and equipment if prices are threetimes than Chinese products

Future outlook

Biogas plant owners and biogas research engineers are appealing to the government for increasing the gridelectricity price and decreasing the up-grid barrier

If successful, will help profitability of even small scale biogas plants

With the government emphasis on promoting green energy, the situation of non-profitable biogas plants may changein near future

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Biomass power generation


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Goals for biomass power generation

According to the demands of social and economic development and availabletechnologies, biomass power generation will be a key area for development inrenewable energy

General goal for biomass power generation

5.5 GW in 2010

Including 4 GW generated from agricultural and forest biomass

30 GW in 2020.

Detailed goals for different biomass by 2010

3 GW for agricultural biomass power generation

1 GW for forest biomass

Agricultural + forest together in 2020: 24 GW

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Goals in geographic perspective

Grain production areas (Henan, Shandong, Heilongjiang, Jiangsu etc.)

Building biomass power plants using straw as the materials or transforming small coalpower plants to use straw

Forest and bush areas (Inner Mongolia, Jiangsu, Heilongjiang etc.)

Building biomass power plants using rice hull and residue from bush and forest processingas materials in large and medium-sized agricultural processing enterprises

Areas suitable for forest growing and biomass power generation (Sichuan,Inner Mongolia etc.)

Planting energy forest on the wasteland

Jiangsu Province

Planned to develop biomass power generation of 500 MW from agricultural and forestresidue in 2010


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Subsidies for biomass power generation

Total investment needed from 2006 to 2020 is 200 billion Yuan

New increased installed capacity of 28 GW in biomass power generation

If investment is 850 /kW, total investment will be 24 billion .

Guidelines for Applying for Special Fund of Environment Protection ProgramsFin No.[2006]318)

Fund allocation and subsidizing loan interests

Programs enjoy subsidizing loan interests max. three years

During the period of carrying out the program, the actual paid interests will be totally or partiallysubsidized.

The subsidy starts from June 21 of last year to June 20 of this year (2010).

Notice of Preferential Policies for Enterprise Income TaxFin [94]001)

Three years of income tax can be exempted. Not implemented at the moment.

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Status of biomass power generation

By 2006, there were 50 biomass power generation programs that had been approvedby the National and Provincial Development and Reform Commission, with totalinstalled capacity of 1.5 GW.

In 2006, totally 39 biomass power generation programs, with installed capacity of 1.28GW, have been approved.

By the end of 2006, 34 programs were under construction, locating in Henan, Jilin,Shandong, Jiangsu, Heilongjiang, Liaoning, Xinjiang and etc.

Currently, 82 direct fired power generation programs have been approved of whichmore than 40 are under construction, locating mainly in Jiangsu, Anhui, Jilin,

Heilongjiang, Inner Mongolia and etc.

Development of technologies for utilizing and developing biomass energy has beenaccelerated. Today China has available technologies for agricultural and forest biomasspower generation and have laid the solid foundation to scale up the programs.

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Status of national demonstration programs

Direct fired power generation program in Shan County, Shandong

The first grid-connected biomass power generation program in China. On Dec. 1st,2006, it finished construction and was connected to the grid. The technology wasintroduced from Denmark and equipment made in China. The total installed capacityis 25MW. Grey hard straw such as cotton straws and barks form the main rawmaterial.

Biomass power generation program in Jinzhou, Hebei

Started production in 2007. Huaguang Boiler Company developed water-coolingvibrating stoker boiler for biomass power generation. The total installed capacity is24MW. Main raw material is corn straw while cotton straws and branches of fruittrees can also be used.

Biomass power generation program in Rudong, Jiangsu

Started production in 2008 and has total investment of about 300 million Yuan. TheWorld Bank has granted loans for 20 million dollars this project. It adoptsinternationally advanced power generation technology of high temperature and highpressure combustion.

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Case Jiangsu

Status in Jiangsu provinceThe area of Jiangsu Province is 102,600 km2, accounting for 1.05% of the national total,

with population of more than 70 million. The province has the highest population densityin our country.

This is the major grain production area in China. The annual production of biomass strawsis 50 million tons.

In this province, there are 16 approved biomass power generation programs among which14 are direct fired, 1 is mix fired and 1 is gasification power generation.

11 programs have started production. In the northern part of Jiangsu, within the area of200 km as the diameter, there are 11 biomass power plants. In the city of Suqian, there arethree. In addition, there are more are under construction or have been approved.

Too many programs lead to the competition in material market and the soaring price. Priceof rice hull increased from 22 /ton to 56 /ton, straws from 23 /ton to 33 /ton, andbark from 28 /ton to 38 /ton.

There is one manufacturer of biomass power generation equipments, namely HuaguangBoiler Company. Its self-developed water-cooling vibrating stoker boiler has been used inproduction.

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Direct fired power generation

Technology

Straw is packed in the field and stored in various stations. It will be transported to power plant regularly,according to the arrangement of the plant.

Packed straw is smashed and put into the boiler directly.

The dust is from smoke which will reach the emission standards.

Vapor, produced from the boiler, drives the turbine and the generator.

Pretreatment of straw boiler is different from coal boiler.

Moisture content of the material is high, volatile matter is high, ash is low and the heat value is low.

There is more alkali metal in biomass than in coal. Ash melting point is low => in combustion, ashcumulates and forms sediment.

Alkali metal in flying ash and chlorine in smoke may erode the equipment.

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Advantages and disadvantages

Advantages

This is a mature technology with numerous successful cases in other countries.

Straws are smashed and put into the boiler and do not need to be shaped intoany form.

It is suitable for large-scaled production

Disadvantages

Such technology and relevant equipment are not available in China and has to beintroduced from overseas => expensive

This technology is suitable for 20MW-50MW power generation. 2.5-4.5thousand tons / year of straws are deeded. The work of collecting straw has

many challenges and high cost. Large amount of investment will be needed in buying technology and therefore

the technology does not suit small-scaled power generation.

Straw pre-treatment equipment has low efficiency.

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Current status and programs

By 2008, there are more than 25 large biomass power generationprograms that have connected with the grid

The total installed capacity is 600 MW, with annual production of30*108 kWh and consumption of biomass of more than 400*104T

They are mainly located in Shandong, Jiangsu, Anhui, Hebei,Henan, Jilin, Heilongjiang and etc. Power generation from caneresidue is developed in southern area of China, such asGuangdong, Guangxi, Yunnan and etc.

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Boiler companies

Purely straw burning boilers in preliminary stage of design

Wuxi Huaguang Boiler Company has developed a straw boiler and has

the full IPR for the technology. It has started production of the boilerin Hebei Jinzhou Straw Power Plant.

Jinan Boiler Company and some other domestic companies areproducing biomass boilers parts for foreign companies. Some foreigncompanies have assembly in China.

Domestic universities, research centers and equipmentmanufacturers are actively developing boilers and equipment for pre-retreatment of materials. Small-scaled experiment anddemonstration projects have been launched.

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Co-firing power generation

Technology

View from foreign experiments: when the weight ratio ofbiomass is less than 20%, biomass with high chlorine andhigh alkali will not lead to erosion, accumulation of ash orother harm to the boiler.

Fluidized bed is the best technology for co-firing of strawand coal

Suitable for most materials that are not easy to burn

Co firing power generation


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Advantages

Simple technology

Small investment

Disadvantages

There is no monitoring and measuring equipments to

identify the share of biomass used in power generation=> difficult to get into feed-in tariff scheme.

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Two large programs: Shandong Shiliquan PowerPlant Transform Program and Xiexin Baoying

Biomass Co-fired Program

Seven small thermal power plant mix the biomassmaterials, including straw, rice hull, bark, reed and

the mud in urban sewage treatment plant. Theyare all invested by HK Xiexin Group.

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Technology

Gasification takes biomass as the material and air orvapor as the media. Through chemical reaction underhigh temperature, biomass is changed to be flammablegas, which have CO and H2 as the major content.

Flammable gas has impurity substances, mainly coketar, ash and small amount of alkali metal. Coke tar isthe substance affecting the normal function of

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Advantages

CFB is currently the only gasification technology that has been used in large-scale power generation.

Technology has national intellectual property rights favorable to thedevelopment of straw power generation.

It is suitable for power plants of all sizes.

Straw does not need to be shaped before gasification.

Disadvantages

Too much ash in smoke leads to large amount of ash and residue in the coketar which has to be disposed.

Too much coke tar sewage to be disposed. Difficulty of disposal has increased.

The carbon content in residue is high and transformation efficiency is low.

The current biomass CFB power plant are all using rice hull and woodenpowder as materials. The problem of utilizing straw has not been addressed.

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One large program, Gaoyou BiomassGasification Power Plant, 5.5MW

A number of gasification power plants locate inJiangsu, Fujian, Sanya Hainan, Handan Hebei,

Heilongjiang with the size smaller than 1MW.

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Types and origins of technologies

BWE from Denmark

Shandong Shan County Direct Fired Power Generation Program. The technology is introduced from Denmark byNational Bio Energy CO. Ltd. and the equipment is made in China.

Self-developed technology of circulating fluidized bed boiler

Jiangsu Suqian Direct Fired Power Generation Program. The technology is jointly developed by China Energy SavingInvestment Co. and Zhejiang University.

Self-developed water-cooling vibrating stoker boiler

Hebei Jinzhou Direct fired Power Generation Program. The boiler is developed by Huaguang Boiler Company.

Self-developed chain gate boiler

Henan Changge Thermal Power Plant. The technology is developed by Sifang Boiler Company of Shanghai ElectricGroup.

Self-developed CFB

Jiangsu Xinghua Gasification Power Generation Program. It is developed by Guangzhou Energy Research Institute.

Self-developed fixed bed gasification power generation technology

Jiangsu Gaoyou Gasification Power Generation Program. It is developed by Jiangsu Linyuan S&T co., East ChinaUniversity Of Science And Technology and Shenyang Gas & Heat Research and Design Institute of Ministry ofConstruction.

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Types of owners

National Bio Energy CO. Ltd.

Owns most of the direct fired power generation program.This company has broad cooperation at home and abroad. Ithas advanced technology and sufficient funding.

Local investment companies

They have sufficient funding and usually have relation withgovernment.

Private enterprises Few. They have difficulty in financing => are smaller and

mainly focus on gasification programs.

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Company profileNational Bio Energy Co. Ltd. (1/2)

Professional in developing and utilizing bioenergy. It benefits frominternationally advanced direct fired power generation technology and richbiomass resources in China.

The company invests in biomass power generation programs and expands tothe whole industrial chain, including producing and processing biomass fuels

and recycling ash.

The company was established on July 7th, 2005, registered capital 2 billionYuan (0,24 billion ).

The company currently has 40 programs, locating in Shandong, Hebei, Henan,Jiangsu, Heilongjiang, Jilin, Inner Mongolia, Xinjian, Hubei, Anhui, Shaanxi andetc.

Among those 19 have started production with installed capacity of 396MW. 9 programs are underconstruction with installed capacity of 282MW.

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Company profileNational Bio Energy Co. Ltd. (2/2)

The company invested in the first nationaldemonstration program of direct fired powergenerationShandong Shan County Direct FiredPower Generation Program. Equipment of 130 MWstarted production on Dec. 1st, 2007.

It also invested in Heilongjiang Wangkui Program

which is the first biomass power generation programusing corn straws as the main material. This programstarted production on Nov. 16th, 2007.

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Liquid biofuels:bio-diesel and bio-ethanol


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Bio-diesel raw material potential

Potential for planting suitable crops isapprox. 20 Mha.

Main crops:

sweet sorghum and Jatropha curcas ,

Pistacia chinensis Bung

Aluerites fordii Hemsl

Potential for bio-liquids 50M tons/a

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Bio-diesel objectives in Chinese energy policy (1/2)

According to its land resource and agriculturalproduction policies, China aims at breeding scientificenergy plants, constructing large-scale raw materialsupply base and cultivating large bio-liquid fuel

enterprises.

Current key focus area is to develop bio-dieselproduction technologies to utilize energy crops such as

Jatropha curcas , Pistacia chinensis Bunge, Alueritesfordii Hemsl, and cottonseed.

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Bio-diesel objectives in Chinese energy policy (2/2)

Also restaurant waste oil recycling system needs to beestablished gradually.

Biodiesel consumption is expected to reach 200 thousandtons by 2010 and 2 million tons by 2020 (Eleventh FiveYears Plan)

Series of biodiesel pilot projects will be constructed by2010 in Sichuan, Guizhou, Yunnan, and Hebei provinces.

Crops being used are Jatropha curcas , Pistacia chinensis Bunge andAluerites fordii Hemsl.

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Bio-diesel market status (1/2)

Currently biodiesel produced is used mainly for vehicles.There is no official standard, but B5 is suggested andsubmitted to the government for approval.

Annual capacity for Bio-diesel production based onrestaurant waste oil, tank settlings from oil plants, oilplants reached 50.000 tons a year

Altogether the biodiesel production is only hundreds ofthousands of ton/a, due to limited availability of rawmaterials

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Bio-diesel market status (2/2)

A small part of the products are sold to biomasspower plants as fuel

About 20 market actors and all of them are small scaleand no one can dominate the market trend

Most of market actors are private enterprises. Twomajor players are Longyan Zhouyue company andGushan Company

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Bio ethanol objectives

under Chinese energy policy

Consumption targets (non-food based bio-ethanol)

2 million tons by 2010

10 million tons by 2020

Currently raw materials used for ethanol is mainly food-based(corn, wheat), potato (cassava and sweet potato), sweetsorghum stem, sugar cane and agricultural straw, etc.

Target is to limit usage of raw materials competing with foodproduction

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Bio-ethanol raw materials targeted

Sweet sorghum stem

In areas of rich resource of low-quality land (north-east and Shandong province)

Potato-based ethanol

In areas with large scale potato plantation (Guangxi, Chongqi and Sichuan, etc.)

Quercus (rich starch content)

Inner Mongolia, Jilin, Heilongjiang, Hubei, Jiangxi provinces

Facilitates the bio-ethanol project development of big state enterprises in thearea

Cellulosic biomass (such as agricultural straw)

Test production is being developed

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Development of bio-ethanolNational pilot projects (1/2)

In April 2001, 4 pilot projects approved:

Jilin ethanol company, 0.3M tons

Henan Tianguan company 0.32M tons

Anhui Fengyuan company 0.32M tons

Heilongjiang Huarun ethanol company 0.1M tons

The first pilot projects have been extended in four provinces (Jilin,Henan, Heilongjiang, and Anhui) with total capacity of 1.32M tons/ybased on over-stored grain approved

From June 2002 to June 2003, pilot vehicle utilization of ethanol-gasoline mix organized in Henan and Heilongjiang

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Development of bio-ethanolNational pilot projects (2/2)

In 2004, pilots extended to whole Heilongjiang, Jilin, Liaoning,Henan, Anhui, and partial Hebei, Shandong, Jiangsu, Hubei,but low development due to higher price than gasoline

In 2004, global energy crisis and gasoline price raised and 4pilot enterprises increased their capacity

By now, total capacity of these 4 enterprises over 1.5M tons,but falls short from the long term market demand

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Development status for bio-ethanol

No new bio-ethanol projects based on grain will beapproved

Preliminary condition reached for commercialdevelopment of non-food based bio-ethanol technology

Production of 0.3M tons reached by 2007

Smallest production scale considered economical is

county level Capacity of 3000-5000tons/a

Smaller not economical, bigger face problems with raw materialcollection

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Bio-ethanol technologies

At present, enzyme based ethanol production is mainly fromsugariness and starchiness fermentation

Lines for Cellulosic ethanol have been constructed. Cellulosicethanol still in R&D stage and industrial examination. Technology isnot mature enough and has high cost. Today dozens of pilot planttest and or lab researches production on-going.

China has made progress in Cellulosic ethanol R&D. Several largeenterprises have cooperated with research institutes on industrialtechnology R&D and tests, and some pilot plant production lineshave been built.

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Main bottleneck in bio-ethanol


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Main bottleneck in bio ethanol

technology development

The enzyme activity: hemicelluloses is the maincontent of straw and xylose has restriction to theenzyme

Solving this is the key in enhancing thefermentation efficiency

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Bio-ethanol market status

Currently COFCO has close to monopoly inethanol. It benefits from strong control of the rawmaterials and its cost. It also has the investment

capability as well as commercialized technology.

Most enterprises in the industry are stated owned

and have strong market positions and investmentresources

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Summary

Summary


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87

Generally, the bioenergy sector is still in initial stages of development in

China, and few concrete projects are currently planned or announced

However, there is mostly great interest in cooperation

Most projects, though, are currently still not profitable because of: High production costs: high transport costs for raw materials

Immature supporting technologies: limited auxiliary equipment

Lack of carbon tax: key enabler of bioenergy growth in other nations Central and local governments generally support bioenergy development

and have instituted financial support policies (e.g. subsidies, tax breaks,

preferential loans)

Finnish entrants must understand the market perception and readiness

for their specific technologies often differs by geographical area andfield

In some cases, there is need to educate potential customers

General bioenergy observations

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Biogas systems Amount of biogas plants grows fast with an annual increase of 1000+

90 % of the biogas projects are in medium size with daily output of1000m3/d biogas and total investment below 0,5 M

China has long experience in design and construction of biogas plants

Biogas project contractors can make good returns even today

Plant owners are not doing the plants to gain profits from the plant =>the functioning and efficiency of biogas plants are not fully utilised

Size of investment is the key decision making factor among most project

owners

Construction of biogas plants relies heavily on government subsidies

Situation may change and there are companies in the market focusingon that

Certain Finnish biogas related technology, such as blender and purifying

equipment, can have market in right type of projects88

Summary


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Biomass power generation 460 million tons of agricultural and forest residue that can be used

as energy in China.

Straw is the largest raw material resource with 240 million tons; forest resources

160 million tons

General goal for biomass power generation is 30 million kW by 2020

The three main technologies are direct fired power generation, co-

firing and gasification Direct fired: By 2008, there are more than 25 large biomass power generation programs that

have connected with the grid. The total installed capacity is 600 MW

Co-fired: Two large programs, Shandong Shiliquan Power Plant Transform Program and Xiexin

Baoying Biomass Co-fired Program. Seven small thermal power plant mix the biomass

materials, including straw, rice hull, bark, reed and the mud in urban sewage treatment plant.

Gasification: One large program, Gaoyou Biomass Gasification Power Plant, 5.5MW. Anumber of gasification power plants locate in Jiangsu, Fujian, Sanya Hainan, Handan Hebei,

Heilongjiang with the size smaller than 1MW.

National Bio Energy Co is the strongest player in Chinese market

Forest based bioenergy opportunities especially in Inner Mongolia89

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Biofuel development

Biodiesel consumption is expected to reach 200 thousand tons by 2010and 2 million tons by 2020 (Eleventh Five Years Plan)

Series of biodiesel pilot projects will be constructed by 2010 in Sichuan, Guizhou,

Yunnan, and Hebei provincese.

About 20 market actors and all of them are small scale and no one can dominate

the market trend Most of market actors are private enterprises. Two major players

are Longyan Zhouyue company and Gushan Company Non-food based bio-ethanol consumption targets: 2 million tons by

2010 and 10 million tons by 2020

Currently raw materials used for ethanol is mainly food-based (corn, wheat), potato

(cassava and sweet potato), sweet sorghum stem, sugar cane and agricultural straw,

etc. Target is to limit usage of raw materials competing with food production

Currently COFCO has close to monopoly in ethanol. It benefits from strong control

of the raw materials and its cost. It also has the investment capability as well as

commercialized technology. Most enterprises in the industry are stated owned and

have strong market positions and investment resources

fecc bioenergy market study_general presentation_30 6 2010_euro

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